ASOS hails flying start to Primark trial as sales leap

LONDON

LONDON (Reuters) - Online fashion retailer ASOS (ASOS.L) reported "phenomenal" demand for Primark products in the first week of its trial with the discount clothes chain, as it posted another huge surge in sales in its third quarter.

ASOS, which targets young women aiming to emulate the designer looks of celebrities such as Nicole Scherzinger and Cara Delevingne, began a limited trial of Primark fashion items last week, marking the clothing chain's first foray online.

"Clearly there's a very high demand for Primark products among our customer group; and with the internet increasingly being the preferred channel of purchase, those customers are missing out if Primark isn't online."

While Britain's traditional high street stores have suffered as consumers juggle job insecurity and squeezed incomes, online retailers are faring far better. ASOS in particular has bucked the trend, tapping into demand from value-seeking twentysomethings for both branded and own-label products.

The company reported a 45 percent rise in year-on-year retail sales to 194 million pounds ($302 million) in the three months to May 31, helped by demand-boosting price reductions on own-brand products.

The rise was ahead of a company compiled consensus forecast for a 41.8 percent increase and the 37 percent rise in the second quarter.

ASOS shares were up 4.2 percent at 41.48 pounds by 0741 GMT.

UK sales jumped 39 percent to 64 million pounds, with international sales up 48 percent to 129 million pounds, driven by stronger growth in countries where it has dedicated websites, such as the United States, France, Germany and Australia.

The company now makes 67 percent of retail sales overseas and has unveiled plans to strengthen that with the launch of a Chinese-language website in October.

ASOS said its retail gross margin increased by 10 basis points in the quarter and that it should improve for the year as a whole.

The group said it expects full-year results to be in line with expectations.

The consensus forecast in a Reuters poll of 19 analysts was for a full-year pretax profit of 53 million pounds.